© Image d'illustration / © SIP/ Emmanuel Claude
On Wednesday, Chamber MPs have voted in favour of a comprehensive relief tax package aimed at providing financial benefits to both individuals and businesses.
The government’s ambitious "Entlaaschtungspak" (Relief Package), featuring tax cuts for individuals and businesses, was approved in the Chamber of Deputies on Wednesday evening.
The package includes adjustments to the tax scale for two and a half index brackets, relief for tax class 1A, increased tax credits for single parents, an exemption for the unqualified minimum wage, bonuses for young employees, reduced taxes for high-earning foreign workers relocating to Luxembourg, and lower corporate tax rates for businesses.
The changes will come into effect on 1 January 2025, bringing what proponents describe as much-needed financial relief for households and businesses alike.
The Christian Social People's Party (CSV), has delivered on its promise of ensuring higher net income, as highlighted by CSV MP Diane Adehm. She emphasised the law’s dual focus on reducing poverty and easing pressure on the middle class. "This law concretely addresses poverty while also benefiting the middle class", she said.
The Democratic Party (DP) highlighted the package's corporate tax measures, positioning them as essential for maintaining Luxembourg's competitiveness. DP MP Patrick Goldschmidt argued that fostering a business-friendly environment was critical for the country’s future. "For Luxembourg to maintain its importance as a location in the future, it is extremely important to continue efforts in corporate taxation. Without businesses, there are no jobs and no tax revenues", Goldschmidt remarked.
The package received an enthusiastic response from the Alternative Democratic Reform Party (ADR) and the Pirate Party, both of which praised its economic focus. ADR MEP Fernand Kartheiser stated: "More in the wallet and a strong economy. Yes, that’s what the ADR stands for. Today, we're voting on several excellent proposals that the ADR has long advocated for, and we are thrilled."
Pirate Party MP Marc Goergen also voiced his support, noting that many of the opposition's prior demands had been incorporated. "I will vote in favor of the relief package today. It is the right approach. We essentially have a 'relief minister' here who has taken the right path," Goergen said.
However, not all opposition parties shared the enthusiasm. While measures like tax relief for single parents and low-income workers found broad approval, others, particularly the corporate tax reductions, drew criticism.
Luxembourg Socialist Workers' Party (LSAP) faction leader Taina Bofferding questioned the package's fairness, arguing that it disproportionately benefits wealthier individuals and corporations. "The issue is that it's not targeted enough, nor is it socially just. To continue with the metaphor of a cake: those who are hungriest get the crumbs, while those who already have enough – enough to even be able to buy themselves more cake – get the biggest slice," Bofferding said.
David Wagner from the Left (déi Lénk) echoed these concerns, calling the package a giveaway for the wealthy. "Some inequalities are being resolved or eliminated. But others are simultaneously being created," he argued.
The Green Party (déi Gréng) offered sharp criticism as well, with MP Sam Tanson likening the measures to a "St. Nicholas Day for certain people and large corporations." Tanson dismissed claims that tax reductions would drive significant economic benefits, calling them "countertop discussions" without serious evidence to back them.
In light of these concerns, LSAP and déi Lénk proposed separate votes on individual aspects of the package.
Changes to the Omnibus Tax Law
The Chamber of Deputies has approved changes to the so-called Omnibus Tax Law, which includes revisions to corporate wealth tax and the taxation of parents in the event of a separation.
A key change allows parents who share custody of their children to now also share child benefits, raising the question of who should claim tax class 1A. Previously, the person receiving the child benefits was automatically assigned to tax class 1A. Under the new law, however, parents can now decide who will claim the 1A tax class, with the option to alternate this decision each year.
While the opposition parties LSAP, déi Gréng, and déi Lénk praised certain aspects of the legislation, they voiced concerns over the reduction in business taxes resulting from the changes.
During the debate, CSV Finance Minister Gilles Roth acknowledged that, while a finalised legislative proposal would not be ready by next year, suggestions regarding the individualisation of taxation would be brought to the commission for further discussion.
